The fashion industry has been rocked by the recent changes to US import tariffs on goods produced in the People’s Republic of China. Indeed, many fear that the administrative and cost implications could rival those caused by the UK’s departure from the EU in 2021. With even less time to prepare, fashion brands are facing an increasingly uncertain future.
Read on to discover how the new legislation could affect fashion brands and some key strategies for adapting to these changes.
What will the new regulations mean for fashion brands?
The amendments to US trade tariffs during the Trump administration – including changes to tariffs and the potential removal of preferential treatment for Chinese Canadees, Mexican imports – are already having an impact on fashion brands. This includes both the direct costs of tariffs (which can add up to 25% or more on certain categories like apparel) and the increased administrative burden for importers.
While the de minimis exemption for shipments under $800 remains in place for now, there is increasing speculation that this exemption may be revisited or removed in the future. If and when this happens, all shipments, regardless of their value, will be subject to full customs scrutiny. This could add friction, increase costs, and potentially lead to longer delivery times.
What will be the impacts on the wider fashion industry?
Beyond immediate operational challenges, these regulatory changes could lead to significant structural shifts within the fashion industry, both in the US and globally. With the possibility of the de minimis exemption being revoked and the introduction of additional tariffs, fashion brands may need to rethink their supply chain strategies to mitigate rising costs.
This could mean exploring alternative shipping methods, establishing US-based warehouses, or moving manufacturing to countries with lower tariffs or less impact from the new rules. Additionally, consumer behavior is likely to shift as well. Higher import costs might lead shoppers to consider more affordable options, such as second-hand and vintage fashion.
Meanwhile, demand for “Made in USA” products may rise as domestic manufacturing gains a competitive edge. This could spur a faster transition towards near-shoring and localized, sustainable supply chains, benefiting US-based brands as the price difference between domestic and imported goods decreases.
How are fashion brands responding to the changes?
In the past, e-commerce platforms like Shein and Temu have benefited from the de minimis exemption, which helped reduce the cost of importing into the US. In response to the potential changes, these platforms are looking to expand their US operations, diversify their supply chains, and move to bulk fulfillment to reduce reliance on Chinese imports.
Given the increased costs for brands and the already narrow profit margins in the fashion industry, price hikes are likely to follow the end of duty-free de minimis shipments, should that happen. However, brands should implement these increases thoughtfully – focusing on providing added value to customers – to avoid alienating price-sensitive shoppers.
Turning challenges into opportunities in a shifting market
The new US trade regulations could be a game-changer for the fashion industry, requiring brands to rethink their supply chains, pricing strategies, and business approaches. While the added costs and administrative burdens pose challenges, they also present an opportunity for brands willing to innovate and adapt their sourcing and fulfillment practices.
With shifting consumer preferences and increasing momentum behind domestic production, the brands that can quickly and strategically respond to the evolving US fashion landscape will not only survive these changes but will also be able to turn them into opportunities for continued growth.
